The past few months have been emotionally draining – almost constantly, and sometimes simultaneously – devastating, uplifting, worrying and inspiring. And unfortunately, in addition to all those emotions that so many families are experiencing, people are also suffering from their very worrying financial situation, as their incomes have been cut.
Even under ‘normal’ circumstances there are financial ups and downs. And even more so in Israel, where everyone needs an added buffer of savings that are built up each month. In the current situation, businesses in the south especially are showing huge losses as people are staying home more, and buying less. The decimated tourism industry has had a widespread impact on many businesses – from the hotels and hostels, through to the restaurants, local stores, tour guides and countless other venues and small and medium sized businesses.
There are those who are working fewer hours as they don’t want to leave their children unsupervised while under the threat of missile attacks. And those reduced hours will be reflected in a reduced paycheck. Although the government is offering financial incentives for those within varying distances from the Gaza Strip, it is unlikely that even those who are eligible will recoup all their losses. And then there are those who don’t qualify for the assistance and yet have also had their earnings decimated
For those whose finances have been directly affected by the war
Some of you reading this are experiencing these losses first hand. To you I emphasize that it’s critical to educate yourself regarding the various compensation programs offered by the government and various consumer rights organizations. They can protect you vis a vis unscrupulous service providers who don’t refund deposits etc for war related financial losses.
But in addition to recovering or minimizing losses – do you have a backup plan in place to make it through the coming month with limited income? What if the conflict drags on for months? Will you have enough to manage without adding to the already incredibly stressful environment?
For those whose finances have not been directly affected by the war
Even those of us who are not directly affected must recognize that at any time our earnings can be drastically reduced for any number of reasons (illness or disability, unemployment or underemployment), and so we must have an appropriate emergency savings fund in place to help us weather the storm.
Most financial planners will recommend that families should put aside at least three to six months of expenses that are accessible on short notice. While keeping this money in the bank in an account earning close to zero is not an ideal situation for anyone, there are some other options that might offer a better option.
- Money market funds that are managed by the brokerage houses provide instant liquidity and earn generally more interest than a simple deposit in your bank.
- Keren hishtalmut or kupot gemel funds that are liquid (nazil) can provide a backup cash-flow option. Conservative securities like government bonds that are easily liquidated also fit into this category.
- Lines of credit may also be available through your non-bank credit cards or through your pension fund – however running up debt must only be temporary and should be repaid as soon as possible.
Your crucial monthly budget
As I have mentioned in previous articles, a savings plan should be set up to allocate part of your current income to future needs. It is nearly impossible to stay financially solvent and spend everything that you earn every month, while not putting away anything for a rainy day (eg. emergencies, large purchases like a car, or future needs like education or retirement savings). Obviously the savings plan must take into account your unique circumstances and ability to put away money, but if you ignore the future it almost always comes back to haunt you.
When creating your monthly budget, ensure that you have allocated a sufficient amount towards savings as you will be certainly need them at some future time. The key is identifying your future needs with clarity so that you have a strong enough resolve to allocate now for the future – not an easy thing to do when the current need is staring so clearly at you.
Bank fees – an easy way to cut your costs
One seemingly small, but completely painless saving is being offered via the banking system. The Bank of Israel has forced the banks in recent months to offer a variety of tracks for banking fees that the customer pays per month as a global fee, rather than continuing to pay per transaction which generally results in much higher monthly fees. Everyone needs to contact their bank and sign up to benefit from these monthly savings. Just one phone call and you will receive the same service for less money on a monthly basis. There is no excuse for not picking up the phone … and don’t think they are going to call you.
In conclusion
We are actually in control of so little in our lives. Our finances are one aspect that we can impact positively. And whereas it may not improve the many frightening and worrying issues that surround us, it can make a huge and productive difference to the reality of our lives.